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July 27, 2005
More Than The Weather Was Hot In June
Manufacturing and housing, two pillars of the U.S. economy, showed unexpected strength in June, suggesting growth may accelerate in the last half of the year.
Orders for durable goods rose 1.4 percent, building on a May increase that was the biggest in three years, the Commerce Department said today in Washington. Sales of new homes increased 4 percent to a record 1.374 million at an annual rate, Commerce also said.
"Growth is going to reaccelerate,'' said Brian Jones, an economist at Citigroup Inc. in New York. Jones forecast a 2.2 percent rise in durables orders. "The demand side of the economy is really solid.''
Factories received more orders for machinery, computers and military equipment in June. Business investment in new equipment is speeding up after companies limited their orders to work off excess stockpiles from the first quarter, economists said. At the same time, low mortgage rates continue to fuel a housing boom that analysts forecast will produce a fifth straight record year...
Investors "should not be fooled by a low second-quarter GDP'' figure, said Stephen Stanley, chief economist at RBS Greenwich Capital. Stanley lowered his second-quarter growth forecast to 3 percent from 3.3 percent. ``The economy is, if anything, gaining strength, and the third-quarter GDP number could be an eye-popper.''
A similar sentiment could be found at Reuters...
"Business spending on capital equipment is pretty healthy. What it suggests is that we might have somewhat stronger GDP growth than was expected in the second quarter, and we are doing well moving into the third quarter," Logan said.
... and at the Washington Post...
The durable-goods report was "one more indication that the pace of growth is accelerating," said Nariman Behravesh, chief economist at Global Insight, an economic research and analysis firm.
... and at the Financial Times...
“It looks as if the manufacturing sector is off and running again,” said Joel Naroff, chief economist at Naroff Economic Advisors. “With demand strong, the growth in backlogs should persuade manufacturers to expand production.”
... and you get the idea. Today also saw the latest edition of the Federal Reserve Beige Book, which seems to support the optimistic urge. Here's the skinny, courtesy of Market Watch:
The latest Federal Reserve Beige Book report on current economic conditions found seven of the Fed's 12 district banks saying the economy was getting stronger or remaining solid. Read full Fed survey.
Only one bank district, covering the New York region, said growth was slowing.
This is in contrast to the June beige book, when three regions reported uneven or poor growth.
The report suggests the economy ended the second quarter in good shape...
Shouldn't someone be complaining about those housing sales?
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Listed below are links to blogs that reference More Than The Weather Was Hot In June:
» New GDP data and recession probabilities from Econbrowser
The Bureau of Economic Analysis today released its advance estimates for the second quarter, reporting real GDP growth of 3.4%, implying a very slight increase in the recession probability ... [Read More]
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» Further thoughts about the latest economic statistics from Econbrowser
I've had a little more time to ponder the meaning of some of the economic data released last week, and here's what I've come up with. [Read More]
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